SIFMA Sends DOL Study About Fiduciary Rule Effects

Cost of compliance for study
participants is high. Respondents indicated that they spent
approximately $595 million preparing for the initial June 9, 2017,
deadline and expect to spend more than $200 million more before the end
of 2017. Multiplied industry-wide, that equates to a projected spend in
excess of $4.7 billion in start-up costs relating to the rule,
far-exceeding the DOL’s 2016 estimated start-up costs for broker-dealers
of $2 billion to $3 billion. The ongoing costs to comply are estimated
at more than $700 million annually.

In its comment letter, SIFMA
also provided an explanation of why it is unnecessary to create a new
private right of action to change the standard of conduct in the
financial services sector; changes to the regulatory language needed to
help make the rule work for retirement savers; comments regarding the
exemptions; and a proposed new principles-based exemption that protects
investors and provides certainty to service providers seeking to comply
with the rule’s intent.

Just
days after the final RFI comments were due, the DOL submitted a "notice
of administrative action" to the Office of Management and Budget (OMB) indicating it will extend the transition period preceding full implementation of the expanded fiduciary rule to 2019.

“This
proposed delay represents an important step in protecting Main Street
Americans’ access to retirement planning advice, products and services.
While the delay is significant, it is critical that the DOL uses the 18
months to coordinate with regulators, in particular the SEC, to simplify
and streamline the rule,” Financial Services Institute (FSI) President
and CEO Dale Brown said in a statement. “We are already seeing the
effects of the rule limiting investor choice and pushing retirement
savings advice out of those who need it most. We stand ready to work
with the DOL, SEC and others to put in place a best interest standard
that protects investors, while not denying quality, affordable financial
advice to hard-working Americans.”

Professor Jamie Hopkins,
Retirement Income Program co-director at the American College, said “The
proposed delay was entirely expected. The delay is really more about
giving the DOL time to rework the rule rather than companies really
needing more time to prepare.”

Hopkins indicated there is an
expectation that the private right to action through class action
lawsuits will be removed from the rule, some product-specific changes
will likely be built into the rule, and more and expanded exemptions
from the general rule will allow many companies to keep doing business
as they do today without significant change or interruption.

“The
expanded fiduciary rule is likely here to stay, but its impact could be
significantly reduced over the next few years if exemptions from the
rule are significantly expanded. That is really what requires close
attention and watching moving forward,” he said.

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